Ask Question
18 September, 15:05

Magna Corporation has an issue of commercial paper with a face value of $ 1 comma 000 comma 000 and a maturity of six months. Magna received net proceeds of $ 973 comma 710 when it sold the paper. What is the effective annual rate (EAR ) of the paper to Magna?

+1
Answers (1)
  1. 18 September, 15:34
    0
    The effective annual rate (EAR ) of the paper to Magna is 5.47%

    Explanation:

    interest rate = [1000000 - 973710]/[973710]

    = 2.7%

    EAR = (1 + interest rate) ^2 - 1

    = (1 + 2.7%) ^2 - 1

    = 5.47%

    Therefore, The effective annual rate (EAR ) of the paper to Magna is 5.47%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Magna Corporation has an issue of commercial paper with a face value of $ 1 comma 000 comma 000 and a maturity of six months. Magna ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers